The findings matter because Indonesia, home to the world’s largest Muslim population, has yet to fully capitalize on its Islamic finance sector. With market share still hovering around 7–10% of national banking assets, Islamic banks face growing pressure from conventional banks and rapid fintech disruption.
A Sector with Big Potential but Structural Challenges
Islamic banking has expanded globally over the past two decades, driven by demand for ethical financial systems that avoid interest (riba) and speculative practices. In Indonesia, key milestones such as the establishment of Bank Muamalat in 1991 and regulatory support through the Sharia Banking Law have strengthened the sector’s foundation.
However, growth has not matched expectations. The relatively low market share reflects structural challenges, including limited competitiveness, inefficiencies, and slower adoption of digital technologies compared to conventional banks.
This is where the study by Noorikha Pandayahesti Saputeri and colleagues becomes highly relevant. It identifies strategic focus and digital innovation as two interconnected drivers of performance improvement.
How the Research Was Conducted
The researchers used a quantitative approach to examine relationships between business strategy, technological innovation, and bank performance. Data was collected from 42 respondents representing 14 Islamic commercial banks across Indonesia. These respondents included top management, marketing professionals, and IT staff—key decision-makers in strategy and innovation.
The analysis applied Structural Equation Modeling (SEM-PLS), a statistical method that allows researchers to measure both direct and indirect relationships between variables. In simple terms, the study tested how well targeted business strategies and digital tools work together to improve outcomes.
Key Findings: Strategy Alone Is Not Enough
The study presents clear and consistent results:
- Focus strategy directly improves performance
Banks that concentrate on specific market segments—such as halal SMEs, Islamic boarding schools, or Muslim communities—achieve better operational results and customer engagement. - Technological innovation independently boosts performance
Digital tools like mobile banking, artificial intelligence, and automation enhance efficiency, reduce costs, and improve service quality. - Innovation strengthens the impact of strategy
The most important finding is that technological innovation acts as a mediator. In other words, focus strategy becomes significantly more effective when supported by digital capabilities. - Strong explanatory power of the model
The study shows that 63.6% of performance variation is explained by the model, while technological innovation explains 72.4% of its own variation—indicating a robust analytical framework.
All tested relationships were statistically significant, confirming that the integration of strategy and innovation is not theoretical but empirically proven.
Why Focus Strategy Works in Islamic Banking
Focus strategy means targeting a specific group of customers and tailoring services to meet their needs better than competitors. In Islamic banking, this approach is especially relevant because customer needs are often tied to religious values, ethical considerations, and community identity.
By concentrating on niche segments, banks can build stronger relationships, increase customer loyalty, and deliver more personalized services. However, without technology, scaling these advantages becomes difficult.
The Role of Technology as a Game Changer
Technological innovation transforms how banks operate and interact with customers. Tools such as mobile apps, digital onboarding, and automated processes allow banks to deliver faster, more efficient, and more accessible services.
The study shows that innovation does more than improve efficiency—it amplifies the effectiveness of business strategy. Banks that combine targeted market focus with digital tools are better positioned to compete in a rapidly evolving financial landscape.
As Noorikha Pandayahesti Saputeri of Asia e University explains, integrating strategy with technology enables banks “to better serve specific market segments and strengthen overall performance.”
Implications for Industry and Policy
The findings have practical implications across multiple sectors:
- For Islamic banks
Strategic focus should be paired with continuous investment in digital innovation to remain competitive. - For regulators
Institutions such as Indonesia’s Financial Services Authority (OJK) and Bank Indonesia can accelerate digital transformation through supportive policies and infrastructure. - For businesses and SMEs
Improved banking services can enhance access to financing, particularly for halal and community-based enterprises. - For the broader economy
Stronger Islamic banking performance contributes to financial inclusion and sustainable economic growth.
A Clear Message for the Future
The research delivers a straightforward conclusion: strategy and technology must work together. Focus strategy alone provides direction, but technological innovation provides the tools to execute it effectively at scale.
Banks that fail to integrate both risk falling behind in an increasingly digital and competitive environment.
Author Profiles
- Noorikha Pandayahesti Saputeri– Researcher at Asia e University, specializing in strategic management and Islamic finance
- Juhary Ali– Professor at Asia e University, expert in business strategy and international management
- Tulus Suryanto – Lecturer at UIN Raden Intan Lampung, focusing on Islamic economics and banking
- Zulkarnain Kedah – Academic at Asia e University, specializing in business strategy and innovation
Source
Saputeri, N. P., Ali, J., Suryanto, T., & Kedah, Z. (2026). Effects of Focus Strategy and Technological Innovation on The Performance of Sharia Commercial Banks in Indonesia. International Journal of Economic, Finance and Business Statistics (IJEFBS), Vol. 4 No. 2, pp. 97–110.
DOI: https://doi.org/10.59890/ijefbs.v4i2.395
URL: https://dmimultitechpublisher.my.id/index.php/ijefbs
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